The Top 7 Questions On Consumer Proposals
2014-10-08 minute read
What is a Consumer Proposal?
A Consumer Proposal is a formal, legally binding process to deal with debt. Although it is not a bankruptcy, it falls under the Bankruptcy and Insolvency Act. A Consumer Proposal can be thought of as a settlement between you and your creditors to forgive some or all of your debts in full in return for an agreed lower monthly payment over an extended period, not exceeding five years. Payments are made through a Licensed Trustee, who will be the Administrator of the Consumer Proposal. The Trustee will disburse the payments to each creditor that has proved a claim in the proposal.
Consumer Proposal over other methods of debt relief. Namely, a Consumer Proposal can help eliminate your unsecured debts by offering your creditors a payment plan that you can afford and that your creditors agree to.
What is the requirement to file a Consumer Proposal?
A Consumer Proposal can be made by an individual who owes $250,000 or less, excluding a mortgage on the principal residence. It is possible to make a joint Consumer Proposal if all or substantially all of the debts of the individuals making the joint proposal are similar and the total debts do not exceed $500,000. The Trustee will file the proposal with the Office of the Superintendent of Bankruptcy (OSB). Interest stops accumulating from the date the proposal is filed. Once the proposal is filed, you stop making payments directly to your unsecured creditors. Unsecured creditors will not be able to take legal action against you to recover their debts, nor will they be able to seize your property. Most wage garnishments will also stop immediately. Finally, collection agencies can no longer call you for payment.
What happens if my creditors do not accept the Consumer Proposal?
Your creditors have 45 days from the date the Consumer Proposal is filed with the OSB to accept or reject your proposal. If they do not respond within 45 days, they will be deemed to have accepted your proposal. If a sufficient number of creditors accept your proposal, the proposal will become binding on you and your creditors and you will be required to meet the terms of the proposal as a condition of receiving a Certificate of Full Performance. The Certificate of Full Performance is legal proof that you are released from the unsecured debts that were in the proposal, with the exception to certain debts that fall under section 178 of the Bankruptcy and Insolvency Act, whichmust be paid back with interest.
If the creditors do not accept your proposal, you may:
- Change the terms of your proposal (or counter-offer the creditors offer) and resubmit the proposal;
- Consider other alternatives in dealing with your debts; or
- File a bankruptcy.
Can I include a debt owing to the Canada Revenue Agency (CRA) in my Consumer Proposal?
Yes. A debt owing to the CRA for personal taxes, source deductions and GST / HST can be included in your proposal. In order to include a tax debt in the proposal, you must be up-to-date on your tax filing.
CRA’s claim will be for the period up to December 31 for the year prior to the date of the proposal. You will be responsible for payment of any tax liability that you incur during the year of the proposal and subsequent years.
How is a Consumer Proposal reported on my credit report?
Your credit report at Equifax and TransUnion will be coded as an R7, which means you have entered into an arrangement to settle your debts with your creditors. A note that a Consumer Proposal has been filed with the OSB will be reflected on your credit report for three years after the proposal has been completed.
How much does it cost to file a Consumer Proposal?
For a creditor to accept the Consumer Proposal, the proposal cannot be for an amount less than what the creditor would receive in a bankruptcy. There is no additional cost to you over and above your proposal payments. The Administrator’s fees are deducted from your payments into the proposal.
How do I locate a Trustee to administer the Consumer Proposal?
You can find a list of licensed Trustees in your area by searching the Trustee Registry of the Office of the Superintendent of Bankruptcy website.
You may also contact the MNP Ltd. office in your region. All of our Trustees are licensed with the government and will be happy to sit down with you for a free, confidential, no-obligation consultation.
